Arabica Coffee Sees Weakness on Strong Exports

September arabica coffee (KCU22) today is down -2.95 (-1.38%), and Sep ICE Robusta coffee (RMU22) is up +3 (+0.15%).

Coffee prices today are seeing downward pressure from dollar strength, concern about weaker global economic growth, and today's news that world coffee exports in June rose +1.3% y/y.

Coffee prices are seeing support from dry conditions in Brazil.  Somar Meteorologia Monday reported that Minas Gerais received 0.6 millimeters of rain last week, or only 17% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

Arabica coffee is seeing support from tight ICE coffee inventories.  ICE-monitored arabica coffee inventories on Monday fell to a new 23-year low of 700,005 bags, the lowest level since 1999.

News of increased global coffee exports are bearish for coffee prices.  The International Coffee Organization (ICO) reported August 2 that global coffee exports in June rose +1.3% y/y at 1.11 million bags, and that cumulative coffee exports in Oct-June were up +0.5% y/y at 98.77 million bags. Meanwhile, the Colombia Coffee Growers Federation reported on July 6 that Colombia's June coffee exports rose +6% y/y to 939,000 bags.  Colombia is the world's second-largest producer of arabica beans.  Cecafe reported on July 6 that Brazil's June green coffee exports rose +0.6% y/y to 2.793 mln bags.

Abundant robusta coffee supplies are bearish for prices.  Vietnam's General Department of Customs reported last Friday that Vietnam's 2022 coffee exports from Jan-July coffee were up +18.4% y/y at 1.144 MMT.  Vietnam is the world's biggest producer of robusta coffee beans.  The USDA June 7 revised its 2021-22 coffee production estimate for Vietnam upward to 31.58 million bags from 31.1 million bags but said 2022/23 production would fall by -2.2% y/y to 30.9 million bags.  

According to last Thursday's data from Safras and Mercado, Brazilian coffee farmers harvested 75% of the 2022/23 coffee crop as of July 26, slower than the 5-year average of 80%.

In a bearish factor, the USDA, in its bi-annual report released on June 23, projected that 2022/23 global coffee production would climb +4.7% y/y to 174.95 mln bags, primarily due to Brazil's arabica crop entering the on-year of the biennial production cycle.  The USDA projects that 2022/23 global coffee ending stocks will climb +6.3% y/y to 34.704 mln bags.
 

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